I have a discretionary trust which is being wound up. Payments are being made to a grandchild of the deceased settlor, who is a US resident with a green card. Trust is registered as passive NFEE for FATCA purposes.
I’m going round in circles trying to work out how I report this for FATCA. Has any one had to do it yet and could point me in the right direction/tell me what forms I need?
Jenna Stevens
AAB
If it is a passive NFFE, I do not believe it needs to be registered with the IRS by the trustees nor do the Common Reporting Standards apply.
For FATCA, my understanding is that the stockbroker/bank holding the assets for the trust has to undergo due diligence to determine if the trust, or part of it, is reportable ie has a substantial US owner-25% or more.
If there is a substantial US owner (ie the grandchild is entitled to 25% or more), then the stockbroker/bank holding the assets for the trust has to include this information in its own FATCA report to HMRC
The trust is under an obligation to update the records of the stockbroker/bank holding the assets so that they can comply with their obligations and the trust will be required to complete various US tax forms by the stockbroker/bank holding the assets.
I am not an expert, but this is my understanding of what should happen-and I am happy to be corrected!
Simon Northcott
Agreed with Simon’s comments on the FATCA position.
Your US beneficiary will also have to make sure the distribution is disclosed correctly to the IRS (via Form 3520), which may require some input from the Trustees.
John Bull
Westleton Drake